It’s a common scenario: You apply for a personal loan or credit card and get denied. The reason seems shrouded in mystery, and you receive a letter with language such as “lack of recent installment loan information” or “proportion of balances to credit limits.” Find out what these reason codes actually mean and what to do about them below.
Have you ever applied for a loan or credit card only to receive a rejection letter citing “lack of real estate secured loan information” as the reason? This vague rejection reason leaves many consumers scratching their heads and wondering what exactly it means and what they can do to get approved next time
In this article we’ll break down what this rejection reason means, why lenders care about real estate secured loans and most importantly, what you can do going forward to get approved for the credit you need.
What Does “Lack of Real Estate Secured Loan Information” Mean?
When a lender declines your application and cites lack of real estate secured loan information as the reason, they are essentially saying you don’t have a mortgage listed on your credit report.
Real estate secured loans like mortgages and home equity lines of credit (HELOCs) are secured by the property itself. If you default, the lender can foreclose and take the home. This makes these types of loans lower risk for lenders compared to unsecured loans like credit cards or personal loans
Seeing mortgage information on your credit report provides key insights for lenders:
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You’ve been trusted to borrow a large sum of money. Mortgages are often for tens or hundreds of thousands of dollars – much higher than the limits on credit cards or personal loans. If another lender approved you for such a large, long-term loan, it suggests you’re lower risk.
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You have experience managing long-term debt. Mortgages take 15-30 years to pay off in full. Making consistent payments over such a long timeframe demonstrates responsibility.
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You have collateral. With the home as collateral, lenders know there’s an asset they can take if you stop paying the mortgage. This lowers their risk.
In short, mortgage information conveys responsibility, experience managing long-term debt, and lower risk due to collateral. When it’s missing from your credit report, you appear riskier to lenders.
Why Lenders Care About Real Estate Secured Loans
As we just covered, real estate secured loans like mortgages make you look less risky because they demonstrate you’ve been trusted with a large, long-term loan and have collateral. In addition, these types of installment loans contribute to your credit mix.
Credit scoring models like FICO want to see that you can manage different types of credit responsibly. This includes both installment loans (like mortgages, auto loans, and student loans where you borrow a lump sum and make fixed payments over time) and revolving credit (like credit cards where your balance fluctuates based on spending and payments).
Having strong mortgage history contributes installment loan information to your credit mix. Too much credit card and personal loan history without any mortgage history can cause this “lack of real estate secured loan information” rejection reason.
How to Get Approved After Being Rejected for Lack of Mortgage Information
If you’ve been rejected for lack of real estate secured loan information, all hope is not lost! Here are some steps you can take to strengthen your credit profile and get approved next time:
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Pay all accounts on time. Payment history is the most important scoring factor. Delinquencies can overshadow other positive factors in your credit history. Keep all accounts current.
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Lower credit card balances. High balances close to your limits convey risk. Try to keep balances below 30% of your credit limits. Pay down balances or ask for credit limit increases.
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Limit new credit applications. New accounts lower your average account age which makes up 15% of your FICO® score. Avoid applying for multiple new accounts close together.
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Become an authorized user. Ask a friend or family member with strong mortgage history to add you as an authorized user. Their account history will begin showing up on your report.
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Add other installment loans. Auto loans, student loans, and personal loans count too. Consider adding one of these to demonstrate you can handle different types of credit.
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Get a credit builder loan. These loans work differently than traditional loans. The lender reports regular payments to the credit bureaus but holds the money you repay until the term ends. This allows you to show positive installment loan history without needing the funds upfront.
The most direct way to get approved is to take out an actual mortgage or HELOC, but that may not make sense depending on your financial situation. The steps above can all help demonstrate to lenders that you don’t pose an increased risk, even without real estate secured loan history.
Be patient and continue building your credit history with responsible habits. Over time, lenders will be more eager to approve you, even without mortgage information on your report.
Specific Strategies to Overcome “Lack of Real Estate Secured Loan Information”
Beyond the general tips already covered, here are some specific strategies you can employ to offset lack of mortgage history on your credit reports:
Boost your credit score: The higher your score, the more willing lenders will be to look past the lack of mortgage history. Some ways to increase your score include:
- Disputing and removing inaccurate negative information
- Becoming an authorized user on someone else’s account
- Limiting hard inquiries by spacing out applications
- Lowering credit utilization by paying down balances
Highlight other positive factors: Even without a mortgage, highlight other positive information on your credit report, such as:
- A strong history of on-time payments
- Low credit utilization
- Diverse credit mix including both installment and revolving accounts
- No missed payments or collections
Provide additional financial information: With your credit application, include documents like bank statements, tax returns, proof of assets/reserves, and letters explaining your situation.
Apply for secured credit: Secured credit cards and secured personal loans require you to provide a security deposit, lowering the lender’s risk. Easier to get approved but more difficult to discharge in bankruptcy.
Add a co-signer: Ask a friend or relative with strong credit and ideally home ownership to co-sign. They’ll be equally responsible for repaying which lowers the lender’s risk.
Explain special circumstances: If you can’t get a traditional mortgage due to unique situations like recent self-employment or residence in a rural area, explain this in your application.
With perseverance and a variety of credit-building strategies, you can overcome the lack of real estate secured loan history and get approved for the financing you need. Don’t get discouraged by this rejection reason – it likely signals you simply need a bit more time and effort to demonstrate you are in fact creditworthy.
Common Questions About Lack of Real Estate Secured Loan Information
Does lack of mortgage history guarantee rejection?
No, lack of mortgage history does not automatically require rejection. It really depends on the overall picture of your credit report and application. Strong payment history, low balances, diverse credit mix, and high income can offset the lack of a mortgage account.
How long does lack of mortgage history impact your credit?
This factor can impact your credit as long as mortgage information is missing from your reports. However, the impact lessens over time as you build your history in other ways, like through on-time payments, lowering balances, and adding other types of installment loans.
Can I get approved without ever having a mortgage?
Absolutely! While a strong mortgage history contributes favorably to your credit profile, you can certainly get approved for credit without one. Focus on maintaining excellent payment history, keeping balances low, limiting inquiries, and adding other installment loan types.
Does rent count as a real estate secured loan?
No, rental payment history does not count as a real estate secured loan because renting does not involve borrowing money from a lender. However, reporting on-time rent payments to the credit bureaus can still build your credit profile.
If I’m rejected for lack of mortgage history, should I just apply for a mortgage?
Not necessarily. Taking on a mortgage is a major financial commitment – don’t do it just to build credit. Consider less costly strategies first, and only apply for a mortgage if you’re fully ready for homeownership and meet all approval requirements.
The lack of real estate secured loan information rejection reason sounds ominous but can certainly be overcome. With a variety of strategic credit-building moves, you can demonstrate your trustworthiness to lenders and get approved going forward. Be patient, persist, and continue employing responsible credit habits.
8 Common Reason Codes and Positive Actions You Can Take in Response to Each
The reason codes listed on your adverse action notice might be difficult to decipher. Don’t worry, we’ve got you covered with some explanations below. There are a lot of reason codes, so we’ve picked some of the most common ones to cover here.
One thing to note is that these aren’t just reasons you might have been denied for credit. They’re also things that can negatively impact your credit score. Addressing them could help positively impact your score while making it potentially more likely you’ll get approved for credit in the future.
Lack of recent installment loan information/insufficient installment loan information
This code means you don’t have any installment loans in your credit history or you haven’t had one active in a while. Creditors like to see that you can handle a mix of revolving and installment loan accounts, and a good credit mix can actually help improve your score.
What you can do: Apply for a small personal loan or a credit builder loan and pay it off as agreed. This helps add credit mix to your history.
>> Read our review of the Self Credit Builder Account